Stock market touches another record
- Article by: STEVE ROTHWELL
- Associated Press
- May 12, 2014 - 5:18 PM
NEW YORK — The stock market returned to record levels on Monday as investors regained their appetite for riskier stocks.
After beating down Internet and small companies for two months, investors decided that those stocks had fallen enough. Among the big gainers were Twitter and Facebook, which had plunged in March and April. The Russell 2000, an index made up of small companies, climbed the most in two months.
Investors have been more cautious this year than last. They've favored big, less volatile stocks that pay rich dividends because of concerns about the outlook for the economy. Utility and energy companies have been among the beneficiaries of this trend, and have outperformed the overall market in 2014.
While interest rates remain low, investors will likely keep getting drawn back into stocks after any sell-off because holding cash isn't generating any returns, said Tim Courtney, chief investment officer at Exencial, an independent wealth management company.
"There is some bargain buying in some of the names that got hit hard in March and April," said Courtney
On Monday, the Standard & Poor's 500 index rose 18.17 points, or 1 percent, to finish at an all-time high of 1,896.65. The index last closed at a record high on April 2, when it reached 1,890.90.
The Dow Jones industrial average gained 112.13 points, or 0.7 percent, to end at 16,695.47 Monday. The Dow's previous record high was 16,583.34 on Friday.
The Nasdaq climbed 71.99 points, or 1.8 percent, to 4,143.86.
The Russell 2000 index rose 26.4 points, or 2.4 percent, to 1,133.65, its biggest gain since March 4. The index had slumped almost 10 percent from March 4 to May 9 as investors sold riskier stocks. The index still remains down 2.6 percent for the year after surging 37 percent in 2013.
Gains on Monday were led by technology and industrial companies, sectors that are expected to benefit most if the economy starts growing faster.
Facebook rose $2.59, or 4.5 percent, to $59.83, reducing the stock's decline since March 10 to 17 percent. Twitter, another stock that has been beaten down recently, rose $1.89, or 5.9 percent, to $33.94.
Stocks also got a boost from some merger news.
Pinnacle Foods surged $4.02, or 13.2 percent, to $34.47 after the company agreed to be acquired by Hillshire Brands. Pinnacle's brands include Duncan Hines and Aunt Jemima, while Hillshire makes Jimmy Dean and Sara Lee products. Hillshire fell $1.19, or 3.2 percent, to $35.76.
Even though stocks have largely moved sideways for most of the year following a surge in 2013, investors are still more concerned about missing the next leg of a rally than a market fall, said Doug Cote, chief market strategist, Voya Investment Management.
In government bond trading, prices fell. The yield on the 10-year Treasury note climbed to 2.66 percent from 2.63 percent on Friday.
Bond yields started falling at the start of the year as an unusually harsh winter put the brakes on the U.S. economy. They have continued to fall even as reports show the economy is strengthening again.
"There are a number of mysteries out there in the market," said Gerry Paul, chief investment officer of U.S. value equities at AllianceBernstein. "To me, one of the biggest is why the 10-year Treasury is trading where it is."
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